What to Do When You Are Paying Fees on Your Credit Card

July 27, 2017

If used responsibly, credit cards can be a convenient way to make purchases, earn cashback and protect yourself from fraud. However, some credit cards come with fees that negate the benefits of carrying the card. There’s so many fee-free credit cards that come with great benefits, that there are few cases where paying an annual fee for a credit card makes sense. So what should you do if you have a card with an annual fee?

Is the Fee Worth It?

Before you go further, evaluate whether the fee is worth it. You may, in fact, have one of the few cards where the benefits far outweigh the fees. For example, if you are a frequent traveler, some premium cards will cover certain travel-related fees, will give you access to premium airport lounges, provide a concierge booking service, among other benefits. Even a $400 annual fee might be a small price if you use these perks regularly. Also, some premium cards offer increased cash-back in certain categories. If you shop these categories enough, your extra cash-back may exceed the annual fee on the card. However, if your credit card offers 2% cashback or less, with no other significant perks, an annual fee is probably not worth it.

Call Before You Cancel

Because your credit score is based partly on your average account age, keeping your card open and fee-free is your best outcome. So before you outright cancel your credit card, call your card’s customer service line and ask for the fee to be permanently removed. Let them know that you are thinking about cancelling. Call armed with a list of cards from their competitors that are better than yours (here are my favorites).

Your card company may offer to just remove the most recent fee. Don’t do this. Insist on all or nothing, since you’ll most likely forget or never get around to calling them next year to have the fee removed. If you need to, ask to talk to a supervisor. In the end, since they make money off of the retailers where you use your card, often they’d rather remove your fee than lose you.

Follow Through and Cancel

If your card’s customer service simply won’t budge on the fee, follow through and cancel on the spot. They may in fact be bluffing, and will recant once they see you are serious. And if they don’t, you’ve still successfully gotten rid of an annual fee that was taking up room in your budget.

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While I do strive to only write accurate information and dispense valuable advice, I am not a licensed financial adviser. All information is based solely on my personal experience and personal research and should be treated as such. Find out more.

Comments

I’ve been offered a few credit cards that do charge fees. Like anything that charges me fees, the return on the item has to be much more than the fee itself. So if I got an American Express card with a $100 annual fee, I’d better be getting A LOT of perks that make up for the $100 I spent for the right to use the card.

But yeah, honestly, I just opt for fee-free rewards credit cards. Maybe they’re less exclusive, but they still help us get the job done.